Counter Factuals

I am reading another book right now by economist Richard Koo, innovator of the balance sheet recession concept.  If you remember what his idea entails, it's that when you have a big bust in asset prices when folks are highly levered, causing technical insolvency as values tumble, the introduction of monetary stimulus is of limited usefulness.  Ultimately, you need fiscal policy from the government to help mend the economy.  He notes that the big examples of a balance sheet recession include the Great Depression, Japan's bust in the late 1980's, and most of the large western economies post-2008.  What Koo emphasizes is that fiscal stimulus, in those cases, was the ultimate antidote.  But, look a little deeper, and there is probably cause for concern even beyond the misallocations that are allowed to linger.  In the case of Japan for the past 25 years, and the U.S. since 2008, the fiscal stimulus implemented prevented a Great Depression type event, but still did no better than only tepid growth.  Now, looking at the Great Depression, Koo would argue that there were initially mistakes under Hoover that exacerbated the initial bust, and later under FDR when he tried to cut budget deficits and triggered the double-dip in 1937.  So, what was it, by Koo's account (and others, like Paul Krugman who calls for a space invasion), that did the trick?  Massive, massive stimulus -- and the only thing that ever gets you there is war.